To ensure the maximum utilization of their fabs today and in the future, Chinese chipmakers have already started cutting tape-out prices to retain existing customers and attract business from Taiwanese IC design companies, reports IJIWEI (via TrendForce). This trend comes as China is expanding its mature node production dramatically as it appears to plan to flood the market with chips to push out competitors. Chinese contract chipmakers have yet to increase their output considerably, but gaining customers will be important as it increases production throughout the coming quarters.
Mainland China-based SMIC, Hua Hong Semiconductor, and Nexchip reduced their tape-out service prices last year for Taiwanese chip design companies to secure orders for new capacity. As a result, some customers of GlobalFoundries, PSMC, Samsung Foundry, and UMC canceled their orders with their regular production partners as they geared up to move them to Mainland China's wafer fabs, according to the report.
In response to the Chinese price cuts, Taiwan-based UMC and PSMC reportedly had to lower their prices to remain competitive. UMC reportedly reduced its quotes for its 300-mm wafer foundry services by 10% to 15% and 200-mm wafer services by around 20%. This change took effect in the fourth quarter of 2023, indicating a direct reaction to the market pressures initiated by Chinese foundries. The report claims that Samsung Foundry also joined this price competition in the first quarter of the year, offering discounts ranging from 5% to 15%.
In addition to looming capacity expansion at Chinese foundries, the semiconductor market's overall sluggishness in 2023 catalyzed some of these price reductions. China and South Korea have reduced their prices aggressively, with cuts of 20% to 30% observed in 200-mm and 300-mm mature processes. Taiwanese foundries have also had to cut pricing to maintain their market positions.
Even TSMC, which is the world's No. 1 foundry that earned 75% of its revenue in Q4 from FinFET-based process technologies (16nm and below), made some adjustments to its quotes to make its services a little bit more attractive to customers amid slow demand for chips, the report claims. In particular, TSMC reduced mask services costs for the processes (which is set to make masks cheaper for new designs), but the extent of cuts depended on order volumes.
With China-based foundries cutting down their tape-out quotes and production prices even before they install all the tools they procured and build all the fabs they are constructing, we can only wonder how they will behave once the new capacity comes online. The sanctions against China's semiconductor sector do not affect mature nodes, so Chinese companies can and will steal customers of other foundries using mature technologies in the coming years.
